Answer:
<u>Long Print Shop</u>
<u>Balance sheet for the year ended December 31, 2020</u>
Amount in $ Amount in $
<u>Assets</u>
<u>Non-current asset</u>
Equipment 20,000
<u>Current assets</u>
Merchandise inventory 14,000
Cash 50,000
Total current asset <u>64,000</u>
Total assets <u>84,000</u>
<u>Liabiities</u>
Accounts payable <u>38,000</u>
Total liabilities <u> 38,000</u>
<u>Equity</u>
Capital <u>46,000</u>
Total equity <u>46,000</u>
Total liabilities and equity <u>84,000</u>
Explanation:
The accounting equation shows the relationship between the elements of a balance sheet which are assets liabilities and equity. This may be expressed mathematically as
Assets = Liabilities + Equity
While assets include fixed assets, cash, inventories, account receivables etc, liabilities include accounts payable, loans payable, accrued expenses etc.
Equity which represents the amount owed to the owners of the business includes retained earnings (which is the accumulation of the net income/loss over the years less dividends paid) and common shares.
